Daimler AG boss Dieter Zetsche introdiced a new Mercedes-Benz model, which is predicted to be the key to the brand’s revival, this week at the 2013 Geneva Motor Show. This was Zetsche’s first major appearance since his contract was extended by the board by a period shorter than anticipated last month. Zetsche will depend on the CLA compact as the solution to Daimler's long-term underperformance in small cars.
The industry also considers the performance of this model as a factor that will affect his management record. Zetsche has a challenging task in front of him. The 59-year-old Zetsche would have to cut the gap between Mercedes and BMW and Audi by fixing a China expansion plan that had failed. He would also need to attract new buyers to the brand’s wider lineup of minis and subcompacts.
Barclays analyst Michael Tyndall said that it’s very important to get its problem in China fixed. He believes that Mercedes will also have to attract the younger generation, further emphasizing the importance of models such as the CLA.
He said that the question now is if management has the motivation and means to grab these opportunities. The CLA is set to make its debut at the Geneva auto show where Daimler would have to prove its ability to leave behind a stuffy reputation that has been attributed for its failure to keep up with its two major rivals. It can be recalled that on February 21, the board decided to cut Zetsche's next term of office to three years from the five years that he expected.
The board also exchanged the manufacturing and truck division heads to improve the CEO potential of the two men. While Zetsche held the top position for seven years, Daimler stock has flatlined, with a 6% increase on the period.
Meanwhile, BMW experienced a 87% boost while VW's share price expanded five-fold. Daimler has repeatedly thrown out its earnings targets as Mercedes had become unable to match the scale of its scale or the fuel economy of its small cars. Mercedes also wasn’t able to keep up with the other brands’ growth in China. Last year, Daimler's underlying profit decreased by 10%. This is expected to be flat in 2013.